Fatigue does indeed stack. I have noticed the following effects:
- It does not reduce THAC0
- It increases your odds of scoring a critical miss. Most swings will critical miss is you are heavily fatigued
- It acts as an anti-kai ability, (or an inverse form of luck), reducing the damage dealt with each blow (if you can make a successful attack that is). A heavily fatigued character that makes a successful strike will generally do minimum damage with the selected weapon